Warning! This site is entirely partisan in its interpretation of events.
One point: Our Leader had apparently sold his position in Harken before this particular fiscal manuever came to pass, and was therefore not in a position to benefit directly from the rise in stock value. He was well launched on his subsequent career in watching ball games and signing death warrants, activities which admirably suit his talents.
“Partisan” only in the sense that no conflicting interpetations are offered, not in the sense that it is false or misleading, only that it states a case and offers no rebuttals. The term is not offered in the pejorative sense, only as an observation. Full disclosure, as it were.
Have you some insight as to the matter at hand, Shodan? I am not the subject of debate, my various failings are not relevant to the matter, just as Scylla’s long standing habit of shoving cuddly kittens into a blender is not germane, and no gentleman would mention it.
Umm… Elucidator, I think Scylla already answered this one. Per at least 3 previous posts:
Per the original cite the Andarko-Harken partnership is simply the partnership between the Harvard fund and Harken. Bolding mine…
Regarding this:
I’m not seeing that. Black indicates that he feels that the transaction wasn’t that great for the Harvard fund, however he makes no reference to “theoretical entities”. The closest Black comes to anything like this is:
Of course here he isn’t referring to a theoretical non-entity in the usage of the words “partnership device”. He’s referring to the Andarko-Harken partnership and it’s terms.
Regarding the debt. Here are the relevant quotes from the article (bolded numbers inserted by me):
Here’s what happened:
The Harvard fund loans Harken $46 million
Harken and Harvard decide to form a partnership.
The partnership get’s $64.5 million of unrelated energy properties from the Harvard fund.
The partnership get’s $26 million worth of drilling operations from Harken
The partnership get’s $20 million worth of Harken’s debt and liabilities
Harvard get’s majority ownership of the partnership (to the tune of 84%)
Harken get’s paid $1 million per year to operate the partnership’s oil and gas ventures.
Harken fund invests $30 million in Harken.
One last time. Where did the debt go?
Some of the debt went to the Andarko-Harken partnership, and some of it was paid off by funds injected into Harken by the financial support from the Harvard fund.
Apparently four times is not enough. I’ll try to put it in terms even you can understand.
IT WAS PAID OFF $30mm in cash was paid by Harvard.
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No. This entity got $90mm or so in assets, and $20mm or so in debt. That’s a very nice debt to capitol ratio.
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Then your ignorance is indeed forlorn, and of remarkable scope. That is not what he said. Anadarko-Harken was not a theoretical entity, any more than you are. It was very real, with significant assets.
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Say what? It would behoove you to have the slightest clue before you go shooting your mouth off. The transaction itself was exempt from reporting to the SEC, however the full scope of it would have had to have been accounted for on the companies balance sheets and income statements. Anybody who bothered to read them would have been duly informed.
Misinformed? By who? When? What false information was disseminated.
You don’t know what you’re talking about.
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And if ever such an imaginary idiot shows up, I’ll be sure and refer him to you for sympathy.
Well, now, that does make a bit more sense. Harvard plowed oodles of money into a company on the verge of bankruptcy, and took on itself the burden of debt. Is this not an extraordinary display of generosity?
It would seem, given a cursory examination of the numbers here, that Harvard screwed itself, which would account for the incredulity of Mr. Black. Does anyone know the ultimate fate of Andarko-Harken? Apparently, Harvard did get some return on its investment, as it sold shares at a high water mark. Did Harvard get all its money back?
You’re really demonstrating your unfamiliarity with SEC regulation and corporate finance. The SEC requires that certain material transactions be disclosed via a public filing. Harken apparently made that filing. Any investor who was following Harken could have looked at their recent filings and found out about this transaction.
You can see this for yourself. All filings after 1993 are available over the internet through the SEC’s EDGAR database. You won’t be able to find the Harken filing there since it predates internet availability, but you will be able to find similar filings. Pick a company and look at their 8-K filings.**
Harken, like many businesses, has had its ups and downs, periods of profitability and periods of losses. No business worth its salt throws in the towel when the going gets rough; it fights and hopes to live to profit another day. A smart business that is saddled with debt will seek to do a workout that benefits everyone involved – a workout such as the one Harken engaged in.**
So you’re not sure if anyone got screwed at all? Then why the invective towards Bush? I think you ought to make a plausible case that someone got screwed before you start throwing out accusations of screwing.
Here’s a list of people impacted by the decision, and why they were better off due to the workout. If you disagree, note it. If you can think of anyone to add who you think was screwed, do so.
Harken – clearly better off as it reduces the amount of debt it needs to service. It avoids bankruptcy.
Harken shareholders – and, N.B., this includes the “little guys” – better off because they are now invested in a stronger company with less debt. Their equity positions get goosed nicely as well.
Harken debtholders – they would have had to approve this transaction through their representative, the trustee. They are better off because they are more likely to be repaid in full – in a bankruptcy, they would take a fraction of what they were owed.
The Harvard Fund – better off because of the risk reduction on the Harken debt they held, much like any debtholder.
Future investors in Harken – the transaction was fully disclosed, so a diligent investor should be aware of it. Plus, the transaction improved the prospects of the company surviving, so it made Harken a sounder investment.
Harken employees – working for a viable company is better than working for a bankrupt one, right?
Harken suppliers and customers – see #6 above.
Seriously, this was a win-win situation all around. I think you need to put up or shut up.
We’ve reached the point in time when an honest debater would pull his head out of his ass, look around, summon up his dignity, and say that he was wrong.
Good question, elucidator; we could be way off base. Those beans Harvard purchased might actually have been magic beans. They were certainly tilled into the soil by Harken; that’s for sure. And certain people inarguably ended up with a certain amount of gold. I just can’t find any towering bean stalks and gold-egg laying geese in this story. All I can verify for sure is a lot of money going into Harken, a lot of operations being funded by the money, and a lot of well-compensated individuals at the executive levels.
Look, Opponents (you know who you are), I really do understand that a publicly traded company is not a closed system; that there’s money in, money out and values that are based as much on speculation as on assets and operational efficiencies. But there’s no magic involved, and if the company isn’t producing anything at a profit or directly investing in profit making enterprises, the money that is made is made by specific entities taking a cut out of the transactions which flow through the business. When this is done openly, it’s just business. When arcane transactions, obscure partnerships and “off the books” holdings are routinely employed, it’s a shell game. Flim-flammery.
I’m willing to be shown that this particular shell game produced Good Things for all involved. It coulda happened that way I suppose, through inattention or inefficiency on the part of those moving the shells around.
There is an old saying: when the bank lends you $20,000, the bank owns you; when the bank lends you $20,000,000, you own the bank.
The point being that, for a relatively trivial sum the bank has no reason to bother worrying about your financial health, but for a major sum, the bank will worry a great deal about your solvency.
It is not “generosity” that would cause a debtholder to engage in a workout with a debtor; it is self-interest. A bankrupt company isn’t going to be paying you back much of anything (pennies on the dollar at best). A viable entity will be able to repay you most or all of what it borrowed. Thus, it’s in the lender’s interest to work with the debtor (within reason) to insure the debtor’s viability, including restructuring the debtor’s obligations to the lender.
For the third (or is it the fifth time,) The Harvard fund, prior to this transaction was holding $47mm in Harken debt.
Harken was facing imminent bankruptcy.
That means that Harvard was going to lose the larger part if not all of that $47mm.
They were in a bad position.
There are three things you can do in this position.
Take the loss.
Wait and hope that you get lucky, and the company pulls through or you get made whole in a bankruptcy proceeding.
Take on more risk by making a further investment in the company that will strengthen it in the long term and increase its ability to pay.
Harvard opted for number 3. This was an unusual choice for an II in their position, but I see several good reasons why they opted for it (though I would not have thought it prudent.) The two biggest are that they apparently had outright ownership of related assets that could benefit from a partnership, and the structure of the partnership would collateralize a large part of the existing and new interest.
This is the most interesting part of the article, because it and some other clues suggest that the Harvard Fund was being run unusually in several respects.
That is the point of the article, and Black’s concerns.
Puh-leeeze. Every shareholder and debtholder of Harken benefited from this transaction, as did Harken employees, because it allowed Harken to continue operating. **
There is nothing arcane, obscure, or flim-flammy about this transaction. It is a fairly routine workout scenario. When a company is ailing (and assuming the parties involved believe that it will be healthy in the future), they will re-arrange their interests to best insure the future viability of the company. There is nothing shady about that; it’s just smart business.**
Uh-uh. Bullshit. Deals like this have NOTHING to do with “inattention” or “inefficiency.” They represent a lot of hard work, a good deal of negotiation, and a lot of thought into how to best structure the workout. While my practice doesn’t involve much in the way of debt restructuring, the stuff I do is similar enough to know that these things don’t happen by accident, and they aren’t shell games. They are real attempts to preserve the economic viability of an enterprise which is ailing in the short term.
So much for specific and reasoned debate. I can’t find the hint of a debatable thesis there.
Repeat after me.
“I will not wear my ignorance like armor. I will not hide behind my ignorance. I will not make shit up when I have no idea what I’m talking about.”
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Are you asserting that Harken did not own income producing assets or profitable businesses?
Do you have a cite for this supposed lack of earnings ability or are you just making this up like everything else?
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This is the classic argument from ignorance: You don’t understand it, therefore you assume that it is not real.
Let me tell you that I am underwhelmed by the proposition that you don’t understand it. That it is beyond you is not remarkable at all considering your stalwart attempts to fend off any actual substantive reason.
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You have. Over and over and over again. By several different people. In terms Forest Gump could understand.
At this point, the fact you do not, and are showing yourself remarkably resistant to reason is your own concern.
I quite understand. It is “unusual”. And you would not have thought it “prudent”. And persons who are inclined to find this suspicious are “ignoramuses”. What’s not to understand?
At any rate, George was pretty much sold out at this point in time, so its relevence to him is a moot point. And if the Harvard fund managers had more money than brains, well, it just shows to go you that if a Texas Awl Man goes up against a Harvard MBA, the MBA’s bones will lie bleaching in the sun. After all, why did Harvard invest so much money in an outfit that had never done anything right to date, other than make rather canny decisions as regards personnel?
Elucidator brings forth this damning piece of evidence against his own personal Satan, George Bush. Xeno joins in gleefully exclaiming that they’ll never be able to explain this one.
All along they don’t realize that what they are actually showing is that Bush saved the Company!
Although, as a gentleman, I’ll take my cue from Elucidator and be sure not to rub it in.
Jeeves! Bring me another kitten. This calls for a celebration!
And you were doing so well, too. You had managed two whole posts without pit-worthy insults and slurs. One had hoped that you might rise from slinging sewer sludge to mere rudeness, and perhaps there on to actual civility in debate. Too much to hope for, it would seem.
